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North Carolina Employer Liable For Mistaken Benefits Information Provided To Employee

    Client Alerts
  • April 29, 2011

Last week, the North Carolina Court of Appeals reinstated a jury verdict for a police officer who was mistakenly given wrong information by his employer about the effect of his continued employment on his retirement benefits. In Walker v. Town of Stoneville, the plaintiff was the Police Chief who retired at age 55. The Town asked him to return on a part-time basis due to a shortage of officers. When he asked the Town's Financial Officer about the effect of his return on his state retirement benefits, he was informed that the additional work would have no impact as long as his earnings were kept below a certain level, and he received no benefits.

After following this arrangement for 12 years, the state retirement system informed the plaintiff that he had exceeded maximum working hours imposed for retirees regardless of income. As a result, he was required to repay all retirement benefits received, and to contribute to the retirement system for the previous 12 years of work. The plaintiff sued the Town, claiming among other things, that he was a victim of negligent misrepresentation.

The Town contended that the plaintiff could not have reasonably relied on information provided by the Town's Finance Officer, and that he had an independent duty to verify information given with the state retirement system. The Court of Appeals disagreed, reinstating a jury verdict for the plaintiff. In its decision, the court concluded that the plaintiff reasonably relied on information provided by the Town. The Town typically served as a liaison between its employees and the state retirement system. As a result, the plaintiff had no independent duty to confirm whether the advice given by the Town was in fact correct.

These state law tort claims would not be permitted in a suit by an employee involving benefits provided under an ERISA plan. However, employers frequently provide employees advice on non-ERISA benefits, such as paid time-off or various forms of special compensation. This case should serve as a warning to employers that any guidance regarding wages or benefits should be carefully verified for accuracy. If an employer is uncertain about the effect of employment on an outside benefit (such as Social Security or Medicaid), the employee should be clearly advised in writing that it is his or her responsibility to verify the effect of employment on that benefit.